Zoom Communications (ZM): A Strong Buy Amid Mixed Market Performance and Evolving Analyst Outlooks

In the ever-shifting landscape of tech investing, Zoom Communications (ZM) has emerged as a compelling contrarian opportunity. Despite a 12-month price return of just +2.1%-significantly trailing the S&P 500 proxy SPY's +17.8% gain-the stock trades at a meaningful discount to its intrinsic value, supported by robust fundamentals and a favorable valuation profile. For investors willing to look beyond short-term volatility, ZM offers a rare blend of undervaluation and long-term growth potential.

Market Performance: Volatility Amid Underlying Strength

Zoom's stock closed at $86.29 on December 31, 2025, down slightly from $86.30 the prior day. This minor pullback masked a broader narrative of resilience: over the past six months, the stock surged 30.14%, and year-to-date it gained 39.71%. While the share price remains 9.7% below its 52-week high, this gap suggests a potential re-rating if near-term headwinds abate. The stock's 5.74% total return over the past year reflects a market that has underappreciated Zoom's strategic shifts, particularly its AI-driven product innovations.

Fundamentals: Profitability and Efficiency Stand Out

Zoom's financial health has improved markedly. For the fiscal year ending January 31, 2025, the company reported a 33.17% profit margin and a 6.23% return on assets, outperforming many SaaS peers. These metrics underscore Zoom's ability to convert revenue into profit while managing its asset base efficiently. Such strength is rare in a sector often criticized for prioritizing growth over profitability.

Valuation: A Significant Discount to Fair Value

The most compelling case for ZM lies in its valuation. A Discounted Cash Flow (DCF) analysis conducted by Simplywallst estimates the stock's intrinsic value at $123.17 per share, implying a 28.6% discount to its recent price of $87.91. Similarly, Alpha Spread's Base Case model calculates an intrinsic value of $94 per share, suggesting an 11% undervaluation relative to the current $83.19 price. These divergent but consistent valuations highlight a market that may be underestimating Zoom's long-term cash flow potential.

Analyst Outlooks: Wide Range Reflects Uncertainty and Opportunity

Analysts remain divided on ZM's near-term trajectory. The average 12-month price target stands at $96.51, with forecasts ranging from $69.69 to $120.75. This dispersion reflects both skepticism about macroeconomic risks and optimism about Zoom's AI expansion. ChartMill's 7/10 rating among 276 software peers further reinforces the stock's relative appeal. For contrarian investors, the wide variance in analyst targets suggests a high probability of outperforming the low end of the range.

The Contrarian Case: Why Buy Now?

Zoom's underperformance relative to the broader market has created an entry point for patient investors. The stock's current price of $83–$86 sits well below both DCF-derived fair values and analyst price targets. Meanwhile, the company's strong profit margins, improving ROA, and strategic AI investments position it to capitalize on the hybrid work and digital collaboration trends. For those willing to tolerate short-term volatility, ZM represents a high-conviction opportunity in a premium tech stock trading at a discount.

Conclusion

Zoom Communications is not a no-brainer buy-it requires conviction in the face of market skepticism. However, the combination of undervaluation, strong fundamentals, and a favorable analyst outlook creates a compelling risk-reward profile. As the company continues to innovate and execute, investors who step in now may find themselves well-positioned for a re-rating in the coming year.